JULY 2015

CASE STUDY
SOUTHERN
CROSS STATION
AUSTRALIA
 WSP|PARSONS BRINCKERHOFF STATION
CAPABILITY

Railway stations are key nodal points for the sustainable transport of
passengers. As such they have an important social-economic and environmental
role to play.
A well-functioning station that can provide comfortable transport options for
passengers in an efficient way will encourage commuters and travellers to use this
comparatively environmentally friendly way of travelling.
Because of the facilities and the technology that a station has to include to function
safely and efficiently, a station by itself consumes large amounts of resources and
might have negative environmental and social impacts on the adjacent
environment.
 TRANSFORMATION OF TRANSPORT HUBS –
SOUTHERN CROSS STATION
Opening Modernisation Redevelopment

2000’s
1960’s
1859

•The 1880s saw the first •In October 1960 work on •Southern Cross was
of several unrealised a new Spencer Street redeveloped by the Civic
plans station commenced Nexus consortium
•Opened as Spencer •The station building •Innovative design by
Street Station in 1859, largely replaced the Grimshaw Architects
•From 1888 to 1894 the 1880s iron shed •Construction began in
layout platforms was •A new 413-metre platform October 2002 and was
altered, with new country number 1 was built. completed in late 2006
platforms •A new double-track •The central features of
•The current coach viaduct was constructed the design include a
terminal location was the between Spencer Street wave-shaped roof, a new
site of a number of new and Flinders Street entrance and concourse
platforms built for station. on Collins Street
suburban services.
 SOUTHERN CROSS STATION PROJECT GOALS
Urban regeneration for
Melbourne was a key focus of
Victoria’s Premier, Jeff Kennett,
who publicized several high
profile capital improvement
projects in the city, leading up
to a bid for the 2006

One of the largest projects associated

with the bid was a $2 billion plan to
regenerate Spencer Street Station and
Docklands
 CIVIC NEXUS CONSORTIUM CONTRACTED TO
DESIGN, BUILD, FINANCE AND MAINTAIN
Project name
Southern Cross Station
Value
$309m (net present cost value, as at June
2002) is the net cost to government for the
station development
$350m estimated value of commercial
development at no cost to government
Department or agency
Public Transport Victoria
Department of Economic Development,
Jobs, Transport and Resources
Number of trains per week
14,000 trains operated by Metro, V/Line and
CountryLink
Number of passengers per week
328,700
Key Facts
The project included two components:
• A transport interchange
• A commercial redevelopment that includes a
retail precinct, car parking and offices
Some of the features include:
• An open design light filled space with full
glass frontage to Spencer Street and Collins
Street with platform access from both the
Bourke Street Bridge and Collins Street
extension;
• Passenger information screens with real time
train arrival and departure information and
comfortable waiting areas;
• A 30-bay coach station;
• Secure, sheltered parking facilities for 800
cars and five-minute drop off and pick up
area; and
• Improved public facilities and new retail
outlets.
“INTEGRAL HUB OF MELBOURNE’S PUBLIC
TRANSPORT SYSTEM.”
Long Distance Tram
‘InterCity’ Interchange at
Services Street Level

Freight to Retail Shopping

Intermodal Centre
Terminals

Suburban Rail Station Outlets

Services

Bus Terminal Linking Urban

Regeneration
MANAGEMENT OF SOUTHERN CROSS STATION

The Southern Cross Station Authority manages the Partnerships

Victoria contract for the transport interchange.

There are a number of

operators at the site who
lease rail and station
infrastructure to provide key
rail services to the public.

Rail operators exchange payment for access rights to the

station – by type of train, axle weight, time of day, number of
services per day

Concessionaire gains
revenue through retail leasing
 SOUTHERN CROSS PPP CONCESSION

Civic Nexus
Consortium
1
Leighton Contractors

2 Concession
ABN Amro

3
Nicholas Grimshaw and
Partners
4
Honeywell
At the end of the lease, the contract can
Cost of Procurement: US$2.3m
be renegotiated and renewed. If either
Basis of Award: Best design at least party chooses not to renew the contract,
cost and lowest availability payment the station will be returned to the Victoria
for operations and maintenance with government in working order
consideration for valuation of
surrounding real estate
 AVAILABILITY PAYMENT
30 Year Concession From Start of Operating Period
Availability Reviewed
Annual Annual
payment against
payment Paid Indexing
(Core quarterly
AUD$ 34 Quarterly of
Services passenger
million Payment
Payment) count
 FINANCIAL STRUCTURE OF SOUTHERN CROSS
Equity Investor Equity Investor
Development Australia ABN AMRO
Fund Management Ltd

75% Equity Stake 25% Equity Stake

Government AUS$34m Developer Debt Financier

Public Transport p.a. Civic Nexus Civic Finance
Victoria Limited

2 bonds of AUS$335m
AUS$167m D&C Contract
1 bond of US$73.9m

D&C Contractor Debtor

AUS$66m for
commercial Leighton Bond Holders
development rights for Contractors
99 year lease
• No payment to concessionaire until construction
completion
• AU$34 million annual availability payment began at
operations.
 FUNDING AND PAYMENT MECHANISM
Funding
Time from RfP to contract award
Funding Stakeholders
% of Private Sector Funds
Debt to equity financing of Private
Sector Funds
Payment
Payment mechanism
The project was 100% financed by the private
sector through Civic Nexus
9 months
• Bond financing through ABN AMRO, 74%
• Equity from ABN AMROB, 14%
• Value of rights to the commercial estate transferred to Civic
Nexus, 12%
100%
74% debt, 14% equity, 12% value of real estate
Core Service Payments (CSP), also known as Availability
Payments, are made quarterly during the operations and
maintenance period of the concession based on station
availability, operations and maintenance
The CSP comprises of 3 main components:
• Capital – reimbursement to the private sector for cost of the
station redevelopment
• Operating – stations operations and management for the 30
year concession period
• Insurance – public sector covers the cost of insuring station
operations for the 30 year concession period
 RISK TRANSFER
• Availability of site (land acquisition/rights-of-way), quality of site
Site risk (geological conditions, existing asset condition), zoning permits
Construction
Design and
• Inadequate planning, substandard design, lack of system
Design risk integration, delayed construction permits and approvals
• Time delay, completion risk, cost overrun, quality issues, sub-
Construction risk contractor mal-performance, untried/complex technology, design
change
• Environmental permits and constraints, stakeholder opposition,
Environmental and social risk
cost of social/environmental mitigation

Commercial risk • Demand shortfall, price elasticity, network interface risk, collection
risk
Operations

Opex risk • Higher O&M, labour and commodity costs

Performance risk • Operational inefficiency, system underperformance, reduced asset

availability, service interruptions, innovation risk
• Refinancing availability, borrowing rate risk, counter-party and
Financing risk
sponsor risk
• Changes in economy, population, demographics, industrial
Political and macro

Macro risk
development, interest rates, exchange rates, inflation

Regulatory risk • Changes in regulated prices, competition, sector framework,

taxation
Political risk • Breach of contract, expropriation, currency inconvertibility, profit
repatriation
Force majeure • Natural or man made events, eg. Earthquake, flood, civil war, fire,
riots, strike
KEY RISK PRINCIPLES FOR SOUTHERN CROSS
STATION
Key Risks Risk Allocated to Risk Allocated to
Private State
Transport interchange facility - Majority Minimal
design, construction, finance and
operation
Commercial development – design, Virtually all Virtually none
construction, finance, operation and
integration
Rail and signalling infrastructure - Virtually all Virtually none
construction

Risks that were not taken on by the private sector were:

• 50 per cent of risk associated with pre-existing site contamination
(contamination that wasn’t previously identified)
• Any financial costs associated with changes to the interpretation of Land Tax
Act 1958.
MONITORING PERFORMANCE THROUGH KPI’S
1 2 3
In contrast to the Department’s
Passenger Food and
Usage
Availability earlier role of directly managing the
Beverage
precinct and the redevelopment,
4 5 6 the key roles are now to:
Security and
Repairs and Bus Bays
Maintenance
Emergency • monitor and assess the
Services concessionaire’s management
7 8 9 and operation of the station
Passenger based on a KPI regime on behalf
Cleaning Information Availability
of the State
and Signage

10 11 12 • manage a number of capital

Baggage/ projects within the precinct
Tele – Pest Control
Traveller
Communication
Assistance
• exercise owner obligations over
14
13 15 third party land in the broader
Car Parking Energy Waste station precinct.
Management Management
 PERFORMANCE ABATEMENT
‘if a Quarterly Performance Report reports the
Concessionaire, in the provision of the Services, as failing
Southern Cross –
to achieve or satisfy a relevant KPI (KPI Failure) then each
Services and KPI Failure will attract, and the Concessionaire will
Development Agreement accumulate, the applicable Penalty Points.’

4 Penalty Bands – Points Based

(Adjusted Core Services Abatement points per Quarter

Band 1 - 2.5% Abatement Amount = Agreement x Penalty
x
Bracket 1 Percentage) 250

(Adjusted Core Services Agreement x (Abatement points per Quarter – 250))

(Penalty Bracket 1 Percentage) + x
Band 2 – 10% Abatement Amount = (Adjusted Core Services Agreement x
(Penalty Bracket 2 Percentage – Penalty
250

Bracket 1 Percentage)

(Adjusted Core Services Agreement x (Abatement points per Quarter – 500))

(Penalty Bracket 2 Percentage) + x
Band 3 – 40% Abatement Amount = (Adjusted Core Services Agreement x 250
(Penalty Bracket 3 Percentage – Penalty
Bracket 2 Percentage)

(Adjusted Core Services Agreement x (Abatement points per Quarter – 750))

(Penalty Bracket 3 Percentage) + x
Band 4 – 100% Abatement Amount = (Adjusted Core Services Agreement x 250
(Penalty Bracket 4 Percentage – Penalty
Bracket 3 Percentage)
 AVAILABILITY PAYMENT LINKED TO PASSENGER
NUMBERS
Annual Passenger Numbers
4,50,00,000
Passenger Numbers

4,00,00,000
3,50,00,000
3,00,00,000
2,50,00,000
2,00,00,000
1,50,00,000
1,00,00,000
50,00,000
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Year
Flinder Street Station
Southern Cross Station

• Annual passenger numbers using Southern Cross

Station have remained half of those through Flinders
Street Station
• Average annual passenger growth:
• Flinders Street Station 3%
• Southern Cross Station 0.7%
 PROJECT PROGRAMME 15 months late
Approvals Design
Intention to
redevelop complete complete April 2005 August 2006
Spencer St Planning Civic Nexus Construction
delays begin Construction of intermodal
station study announced as Ongoing difficulties facility completed and GSA
announced completed preferred bidder to occur related to construction finalised

2000 2001 2002 2003 2004 2005 2006

Southern Cross Expressions of interest Construction Settlement deed

Station Authority sought and request for commenced agreed to deal with
created proposals delays

Completion
Planned
Over Budget Payments to Developer
• $21 million for modifications and additional works to which the Department Of
Infrastructure agreed that the developer was entitled under the original contractual
terms
Payments to the
• $8.5 million to settle claims to which the concessionaire did not admit liability developer withheld
• $2.75 million to settle a site access claim after the 2006 Commonwealth Games

Descoping
• Rail modification and signalling upgrade works were removed from the project
• Department Of Infrastructure taking over responsibility for completion of the project
• The State received a credit (calculated by an independent reviewer) from the
concessionaire for the de-scoped works
DELAYS AND OVER BUDGET
The state required the redevelopment consortium to keep the station at full
operation capacity throughout the project

Work could only occur for three hours at night. This

proved even more daunting than originally expected as
construction crews struggled to move equipment in
place, complete daily tasks, and leave enough time for
clearing the tracks, cleaning the site, and re-electrifying
the system before the morning rush

Dangerous work and undesirable hours, construction

crews had to be paid much more than normal, often just
to sit and wait
 DESIGN SPECIFICATION
The redevelopment had a loosely defined design specification that allowed
innovation, but ultimately provided the catalyst for costly flaws in the design
Key • A transport interchange facility, including a 30 bay coach station
• 800 car parking facility
Design • A commercial development
• Rail modifications and signal upgrades
Requirements • To create a new iconic building in Melbourne, placing particular emphasis
on design
• Construction was required to have minimal impact on station operations

Southern Cross has suffered from design

issues. Its award- winning roof caused
concerns in the form of complaints from
workers and passengers alike that the station
is not circulating air quickly enough to prevent
the build up of train exhaust on the platforms.
In 2011, the state agreed to front the funding
for fitting large fans onto the roof.
 PEDESTRIAN FLOW
Poor planning can create ‘hotspots’ in
pedestrian congestion

The new station layout has resulted in significant inconvenience to thousands of

passengers who use the station every day, and the station has been criticised in
urban design circles for poor connections to secondary streets surrounding the
station and awkward pedestrian junctures

Poor pedestrian
access and tram
interchange at street
level
 LEVERAGING THROUGH COMMERCIAL RETAIL
The performance of the commercial development is also inconsistent with
forecasts for both inside and outside spaces

Shopping complex opened as a Direct

November 2006 Factory Outlet (DFO) with food court
and Virgin Megastore
With unoccupied tenancies, Phase 2
March 2007 opens
The DFO relocates to a new site at South
Wharf and the shopping centre is refitted
2009 by the owner Austexx and rebranded as
‘Spencer Street Fashion Station’
Struggling, the shopping centre is again
2013 rebranded as ‘Spencer Outlet Centre

• A more efficient complex and a subtle mix of retail facilities and public spaces could have been achieved.
• This may have been improved with greater involvement of expert retailers in the design and approval
processes
• The lessons learnt by the contractor in building the roof were not carried through to the adjacent
retail development.
• This has resulted in less favourable public opinion of the commercial development and detracted from
the impact of the overall station development
MORE RECENTLY
The need for comprehensive Due Diligence from the outset……

PTV have funded all night rail services.

However, the concession does not
allow for the station to open and night
trains do not stop
 POSITIVE OUTCOMES OF THE REDEVELOPMENT
Sustainability
• Environmentally sustainable
design

• Innovative low-energy solutions

• Dispersal of diesel fumes, exhaust

gases and hot air without any use
of electric fans

Major Awards
• RIBA International Award
• RIBA Lubetkin Prize
• Australian Institute of Architects
Victorian Architecture Medal
• Australian Institute of Architects
William Wardell Award for Public
Architecture
• Victorian Industry Capability
Network Industry Achievement
Award
 APPLICATION IN INDIA - IDENTIFYING AND ATTRACTING
THE RIGHT SERVICE PROVIDERS MIX
• Formats varying from mono-brand stores to multi
Travel Retail brand stores Key Metrics
(eg. Large bazaar, Lifestyle, Vishal Mart…)
• Focus on diverse range of fast moving goods

• Fast-food retailers to fine-dine restaurants

Food and Beverages • Option for take-away/collaboration for on-board
(eg. Haldirams, CCD…) Footfall
food services
• Increasing passenger dwell-time through movie
Passenger Entertainment theatres, spa facilities
(eg. cinemas…) • Ensuring right mix of high vs low turnaround time
of services to maintain smooth passenger flow Visibility
• Multilayer parking facility for all modes of
Parking Facilities transport
• Segregation between long-stay parking for
Growth
leisure travellers vs short stay parking
forecast
• Vertical expansion to monetise air-space
Office Space efficiently
• Offer temporary/permanent leasing, conference Exposure to
room facilities, desktops tourism /
• Bank branches business
In-station Hotel • Quality stay in-station hotel with waiting lounges
Type of
customers
Other Real Estate • Other construction such as affordable housing
etc.

High return with little investment

 APPLICATION IN INDIA
STATIONS TO REFLECT THE CULTURE AND
CHARACTER OF THE CITY

Information centre for famous

Tie-ups with tour
cultural / heritage sites close to Museums preserving Local theatre /
operators for short
the station and famous places city heritage music shows
day tours
in the City

Access Wait/Leisure time at the station

Vicinity and station

City specific murals on Exhibitions / community
exterior architecture
station walls adding to shows showcasing local
to give flavour of the
aesthetic appeal arts and crafts
City
 LESSONS LEARNT
What does it mean for
Construction risks ‘Constructability‘ station redevelopment?
need to be proactively of designs could
managed by all arguably have been
parties but PPP fully analysed to ensure
models can be very that relevant parties had
effective forms of the capacity to • Align all stakeholders
delivery deliver the such as railway boards,
project The private players and
complexity of the roof
There are additional risk government bodies
design was potentially
associated with ‘iconic’ underestimated by the
projects and these risks private sector partner • Focus on whole life-cycle
need to be managed and its cost was higher instead of opportunistic
intensively than expected approaches

The precinct • Predictable and cost

development was Major project upgrades, efficient processes
generally well integrated on existing infrastructure
that needs to remain
and able to ensure that • Long-term contracts
the project did not dive operation, pose complex
technical challenges need long term
the city from the commitment and
Docklands Important to ensure
resources
development construction companies
have a suitable team to
perform the tasks and
manage all the risk that
are accepted by them
Speaker – Paul Holmes
Technical Lead Transport Commercial and Strategy
Melbourne
www.pbworld.com